Why Bernstein Is Bullish on Oracle's (ORCL) Multi-Cloud and AI Strategy
The rating affirmation follows Oracle's recent multi-year cloud contract, anticipated to fund more than $30 billion in annual revenue, beginning fiscal year 2028. The deal has significantly strengthened Oracle's position in the cloud computing market.
With Oracle demonstrating strong growth, investors are no longer looking at it as a cheap option compared to the big 3 cloud providers. Oracle is also becoming important in AI and AI training data centers.
The firm has highlighted how the company's capital expenditure requirements may be lower than market expectations. This is because it is 'likely not renting, building or leasing data centers.' Moreover, Oracle's multi-cloud database business is growing at over 100% year-over-year, leading to both growth and margin improvement.
'While Oracle's IaaS/PaaS business (OCI Gen 2) generates far less revenue than the other hyperscale Cloud providers, it is showing consistent signs of gaining traction (and market share) not only within its traditional customer base but in the broader market and winning deals for non-Oracle workloads and at not traditionally Oracle customers.'
The firm isn't updating its financial model or price target but anticipates financial projections to increase and investor confidence to strengthen.
'We really like the setup and the story. While we are not updating our model or our TP at this time as more work is required on modeling, we believe that numbers are going to go up, and that investor confidence is going to increase in the story and the stock.'
While we acknowledge the potential of ORCL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 10 AI Stocks in the Spotlight and
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